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Stock Ideas Investors Daily Edge The Markets Don’t Care If You’re Left Behind
Stock Ideas Investors Daily Edge The Markets Don’t Care If You’re Left Behind 
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Dear Reader, I have written several articles over the last couple of months about the chart of the S&P, but things have changed now. The lower rail of the trend channel and the 200-day moving average both gave way on Friday. |
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| The Markets Don’t Care If You’re Left Behind |
| Saturday, 30 August 2008 | ||||||||
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Tuesday morning I received an email from one of financial publishing’s legends. It said, “Market crashing! Last chance for today’s flash alert!” The email came at 10:00 AM, and I didn’t open it until 10:20, minutes before I go into lock down… my four-hour communications blackout during which I write – nothing else. Of course, “Market Crashing!” is an inflammatory subject line. From a purely marketing standpoint, the problem with it is that it didn’t cause me to open the email. It sent me off to check on my Asia Business & Investing newsletter portfolios. I suspect many people did the same thing. They opted to check their portfolios and never opened the email. No Crash Here Anyway, as far as AB&I was concerned, the markets weren’t crashing at all. In fact, Tuesday was a heck of a day for its subscribers. So, I checked with Lynn to see what was up with her Rising Tide Letter portfolio. It was having a nice day, too. As was the case with AB&I, Rising Tide was a sea of green with gains that ranged as high as 12 percent. That made me feel sad for the publishing legend. If his portfolios were crashing, it meant he is likely still trading on the misbegotten notion that the new global marketplace reality is nothing but an investment fad. He’s hoping that GM and Ford will be resurrected, that the US airline industry can be revived. He’s hoping that US workers will decide that it’s patriotic to take 60-80 percent pay cuts so all those lost manufacturing jobs will come home… that companies that make pills, cathode-ray televisions and Windows operating system PCs will be healed. He’s hoping that another generation of politicians will get away with passing the infrastructure-crisis buck so his children end up with the whopping bill to fix roads, sewers and bridges.
And, he yearns for the days when Donna Reed and June Cleaver, clad in cute little dresses, trotted their 22-inch waists around the house dusting, vaccing and cooking, which is so unlike these tough, pushy modern broads who wear pants, boss men around, sit on boards and think they’re actually smart enough to replace men in Washington as congressmen, senators and even – arrgggg! – President… as in President of the effing free world. Dear Mr. Fantasy Now, I would never deny a man his fantasies, but I wouldn’t invest in them, either. Global is not a fad. Today, Japan makes about 2 million more vehicles per year than does the US. Even more telling, in 2007, China built about 1.8 million fewer vehicles than the US did. In a couple of years, it will build more. The US will then be the world’s third largest automaker, though Germany will be closing in. For a while longer, the US will still be the world’s largest consumer. But, those iPods, PC’s, laptops, HDTV’s, stereo speakers (I used the archaic term there), digital cameras, heck, even the iconic Brooks Brothers’ suit, will be made 7,000 miles away. What I find most surprising about this global reality is that it didn’t happen overnight. It’s been growing for decades… so what’s surprising is how many normal, sane, rational people are in denial about it. Or, to invoke a cliché, think the genie can actually be put back in the bottle. The Can Company One of my favorite wine shops on the East Coast is located in Baltimore. The Chesapeake Wine Company resides in a redeveloped – repurposed, if you will – old factory. It is a factory that was a blight on Baltimore’s waterfront for a couple of decades after it was shuttered. Today, it’s home to restaurants, retail shops and DAP’s world headquarters. In its first heyday, the huge complex was owned and operated by American Can. You remember American Can, don’t you? Back in 1928 – a short 80 years ago – it was one of the original Dow 30. Other original Dow 30 companies included American Smelting, General Railway Signal, Nash Motors, Paramount Publix, Postum Incorporated, Radio Corporation, Victor Talking Machine and Wright Aeronautical. My guess is no one back in 1928 saw the future clearly. Nor did they in 1938, ‘48, ‘58 or ‘68. No one saw the advent of McDonalds (fast food), Microsoft (computer software), Citigroup (banking), Walt Disney (entertainment), Intel (computing hardware), Home Depot (retail home improvement), Wal-Mart Store (discount retailer) or Proctor & Gamble (consumer goods conglomerate). Yet, each of these companies is a Dow 30 member today. And, that should lead you to wonder how long it will be before Lenovo replaces IBM in the 30 or China Mobile replaces Verizon? Because, as a historical look at the Dow 30 reveals, the world is always changing… its reality is always in flux. But, it’s only changing too fast – spinning out of control – for people who cling to the past. THE RISK OF BARRING LEGAL IMMIGRANTS In a Barron’s commentary this week, Thomas G. Donlan writes: “In 1980, the US share of the world's advanced technology exports was 29%; by 2005, that was down to 12%.” Donlan notes that emerging countries such as China and India now educate more scientists, engineers and technology workers than the US. And to make sure you get this point, he reports that those statistics are in “both in absolute numbers and as a percentage of their large populations.” According to Donlan, American universities are more focused on graduating lawyers and MBAs. A big reason for that is the heavily regulated US economy offers greater pay-offs for tax avoidance and creative management than it does for technical invention or exacting experimentation. Worse, for the US’s long-range outlook is that the hard-science students who do make it through the rigors of grad school in the US to earn a Ph.D. are more and more likely to be from Asia. More importantly, these new Ph.D.s are more and more likely to go back home to work. And, in one of the bigger unreported stories this century, Donlan says that: “The U.S. shows little interest in immigrants with high skills, even if they acquired those skills in US universities. The same government that all but welcomes illegal immigrants at the bottom of the economy by ignoring them severely limits the number of work visas for skilled people.” In fact, when companies, like Microsoft and Intel, plead for more visas to hire foreign engineers, they run up against opponents who tell the Congress that greedy employers just want cheap labor to avoid hiring expensive Americans. Yeah, like lawyers could ever make Windows Vista work. In the end, the sad reality is that, today, immigration is about politics. It probably explains why Americans are so wary of change. If their leaders won’t fund more science and technology education at both the primary and secondary levels… if they are suspicious of foreigners who possess skills that US workers lack… why the heck should the man on the street embrace change? Unless, that is, to note that the world has caught up with the US, and may be set to pass it by. It will be hard to deny change when those who were once in the US’s rear-view mirror now view it that way. Have a great weekend. Andy P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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